New technologies introduced
into the oil and gas industry have unlocked immense opportunity for exploration
in rock formations that were once deemed unreachable and impenetrable. The
result is a heavy increase of oil and gas activity in rural areas across the
United States, which often causes considerable advantage and disruptions to the
local economy and especially the local housing market.
The increased oil and gas
activity leads to an influx of temporary workers, which collectively represent
a sizable portion of the local population. On one hand, the oil and gas
industry brings a large chunk of money to each geographic area in which it
performs, generating tax revenue as well as fueling direct and induced economic
benefits. However, this population of high-wage workers also dries up the areas
of available affordable housing and ultimately drives up housing and motel
rates to that comparable to new complexes in larger metro areas, well beyond
the reach of local residents not employed by the drilling companies,
subcontractors, or suppliers.
Another residual of the
energy boom is an increasing student population, which drives job openings for
new teachers who in turn find themselves in a considerable pinch to find
affordable housing on a teacher’s salary.
A 2013 study by a panel of
economists comprising the Gas and Oil Task Force (GOTF) offered insight on
eight specific areas across the country where booms in energy exploration have
had significant effects on local housing markets. The areas of focus are: the
Bakken Formation in Montana and North Dakota; the Niobrara Formation in
northern Colorado; the Piceance Shale Formation in western Colorado, the
Permian Basin Formation in eastern New Mexico and Texas; the Barnett Shale
Formation in northeastern Texas; the Eagle Ford Shale Formation in south Texas;
the Marcellus Shale Formation in Maryland, New York, Pennsylvania, Virginia and
West Virginia; and the Utica Shale Formation in Maryland, New York, Ohio,
Pennsylvania and West Virginia.
While GOTF found that while
many energy boom areas have seen accelerated growth (single-year increases in
the employment rate of as much as 41% were recorded in Williams County, North
Dakota, and 27% in Dimmit and LaSalle counties in Texas), much of the
employment and population growth in these areas is temporary. This creates a
formidable snag in analyzing the data, as data collected on temporary or mobile
workers are typically reported by place of permanent residence or that of their
employer’s permanent facility. As such, census and employment data may show
little change over the course of time though thousands of workers may be taking
residence in the area for weeks or months.
According to an article on
HUDUser.org penned by Kurt Usowski, deputy assistant secretary for Economic
Affairs, oil and gas exploration-induced housing also adversely impacts the
U.S. Department of Housing and Urban Development’s (HUD) clients by tightening
the housing market, shrinking supply and cramping operations of HUD’s rental
subsidy programs. Landlords taking advantage of strong housing demand often
terminate leases with local tenants and instead rent to energy exploration
workers at much higher rates. Usowski also reported that in North Dakota, at
least two affordable projects have opted out of HUD rental subsidy programs,
doubled their rent charges, and quickly maxed out their vacancies.
GOTF’s study also revealed
that the effect of oil and gas activity varies by region and type of formation.
The panel continues to work toward developing a methodology for assessing the
effects of oil and gas production on local housing markets to provide HUD with
data to respond to housing and economic needs arising in these areas.
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